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Free Trade Zones in Turkey

August 23, 2012

Law Firm: HERDEM&Co. Attorneys At Law - Istanbul Office

Free Zones Law No 3218 (“FZL”) of Turkey is in force since 1985 as the fundamental law that prescribes the matters related to the establishment of free zones; the determination of their location and boundaries; their management; the scope of their activities; their operation; and the establishment of installations and facilities within the zone with the objective of increasing export-oriented investment and production in Turkey; accelerating the entry of foreign capital and technology; procuring inputs of the economy in an economic and orderly fashion and increasing the utilization of external finance and trade possibilities.

In general, all kind of activities can be performed in Turkish Free Zones such as:

Research and Development (R&D), Storing, Manufacturing, Packing, Software, General trading

According to article 24 of FZL: “A zone may either be operated within the framework of an “Operation Contract” by a company established on the basis of a Decree of the Council of Ministers or established and operated under an “Establishment and Operation Contract”, again by a company established on the basis of a Decree of the Council of Ministers.

In the first case described above, the contract is labeled the “Operation Contract” and the authorized company the “Zone Operator”, whereas in the second case the contract is labeled the “Establishment and Operation Contract” and the company is the “Zone Founder and Operator- Z.F.O.”

Users who are found eligible to receive an Operating License conclude a sales or rental contract with the Operator or the Z.F.O. After the approval of the contract by the Zone Directorate, the Directorate General issues an Operating License. Thereafter the Users can start their investment activities in the Zone.

After preparing their projects and fulfilling their superstructure commitments, Users who plan to construct a building or facility apply to the Zone Directorate for an Occupation Permit. Granting of an Occupation Permit marks the end of the investment phase and the beginning of the operational phase.

The project preparation and construction work should be accomplished within the period specified in the Operating License Application Form. This period is added to the operational phase specified in the Operating License. However, in case where the project and the construction work cannot be completed due to acceptable compulsory conditions within the stated period, an additional period of time can be granted according to the provision of Article 54 of FZL. Additional time periods cannot be added to the duration of the Operating License.

Users can start their activities (without receiving an occupation permit) in their buildings or in another rented working place by receiving a “Temporary Occupation Permit” from the Zone Directorate before completing the construction of the building or facility on the rented or purchased land. In this case, the operational period is deemed to have started on the date they receive the Temporary Occupation Permit or rented a covered area.

Superstructure that was built upon rental of an open area can be transferred to another User by the approval of the General Directorate with the condition of not exceeding the time limit of the operating license that was granted to the first User.

In free zones where the land is privately owned, by the expiration of the Operating License of Users who have constructed buildings and facilities on the rented land, a new license can be issued to the name of that User, with condition of not exceeding the time limit mentioned in the rental contract for the transfer of the superstructure. In case of the expiration of the time limit mentioned in the rental contract, the constructed buildings and facilities are transferred to the Z.F.O. In case when these users ask for the cancellation of their Operating Licenses or when their Operating License is cancelled, these Users can, within the time limits of their Operating License, transfer their right to use the buildings and facilities to real or legal persons that will be approved by the Directorate General till the end of the expiration date of their Operating Licenses. Otherwise, buildings and facilities are transferred to the Z.F.O.

In free zones where the land is privately owned, Users that are operating in the working place they have constructed on the land they purchased can receive a new Operating License upon its expiry. In case of termination of their activities or cancellation of their Operating Licenses, these Users may sell their land and the buildings and facilities on the land to other real or legal persons with the approval of the Directorate General.

Real persons or legal entities intend to engage in operations in the Free Zone may submit their “Operating License Application Form” either directly to the Zone Directorate or may send it by registered mail. After that the Operating License Application Form is filled in and submitted by one of the above means and the Operating License Application Fee is deposited to the Special Account at the Central Bank of the Republic of Turkey, the application is considered as filed. After taking the opinion of the Operator or the Z.F.O., the Zone Directorate delivers the Operating License Application Form” to the Directorate General together with its own opinion. After the evaluation of the application by the Directorate General, those who are found eligible to be granted an “Operating License” are notified in written and the applicant is granted 30 days in order to send to the Directorate General a copy of the contract he would sign to procure the working place where he would carry out his activities as well as the other required documents. After the delivery of the said documents the “Operating License” is issued by the Directorate General. In case of failure to send the documents within this period, the applicant loses his right to get an Operating License, the application file is abolished and the application fee is recorded as revenue to the Special Account.

After the evaluation of the application by the Directorate General, applicants who are not found eligible to be granted an “Operating License” are informed in written and their application fee is reimbursed.

Principles for the manner and procedures of “Operating Licenses” and other permit documents including the evaluation criteria of application, the terms and fees are determined in communiques/circulars issued by the Directorate General.

Real persons or legal entities have been granted an “Operating License” are being registered in the “Registry Book of Firms Information” by the Zone Directorate prior to the start of their operation. In the registry, the information on the license and the Professional and commercial field of activity of the related real person or legal entity are exactly written and a firm registry number is given. The User is obliged to inform the Zone Directorate on any changes concerning his professional or commercial activity and have it registered in the “Registry Book of Firms Information”.

The registration operations mentioned above may also be carried out through computerized data processing techniques.

Application Steps For Operation Licenses in Free Zones:

1) Fill in the Operation License Application Form

2) Deposit the Application Fee in the Central Bank of The Republic of Turkey

3) Apply to General Directorate of Free Zones or to Free Zone Directorate with a Petition;

4) Operation License Application Form and the Bank Receipt enclosed

5) Evaluation of the Application by General Directorate of Free Zones (Favorable)

6) Return of Application Fee to Applicant (Unfavorable)

7) Signing of the Lease Agreement with the Free Zone Operator within 30 days.

8) Approval of Lease Agreement by the Free Zone Directorate

9) Issue and Dispatch of the Operation License by the General Directorate of Free Zones

Physical existence and activity in Free Zone is also required. After signing the lease agreement, the user/operation license holder is expected to start its activities within reasonable time (legally not specified)

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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